Announcement of Sri Lanka Aid Group Meeting on June 21, 1985

FOR IMMEOIA TE RELEASE lNTEilNATJONn• "'- MONETJUi JOINT LIBRARY y Ftnm World Bank 1818 H Street, N.W ., Washington , D.C. 20433 , U.S.A. JUL Z 1985 BANK NEWS RELEASE Contact: Pushpa N. Schwartz June 21, 1985 (202) 477-3651 SRI I.ANICA AID GROUP MEETING The following announcement was issued on June 20, 1985 at the conclusion of the Sri Lanka Aid Group Meeting in Paris. Governments and institutions concerned with development assistance to Sri Lanka met in Paris on June 20, 1985 under the Chairmanship of the World Bank. Attending this twenty-first meeting of the Sri Lanka Aid Group were representatives of the Governments of Australia, Canada, Denmark, Finland, France, the Federal Republic of Germany, Japan, the Netherlands, Norway, Sweden, the United Kingdom, and the United States. Also represented were the Asian Development Bank, the Commission of the European Community, the International Monetary Fund, and the United Nations Development Programme. The Governments of Belgium, India, Italy, Spain, and Switzerland, the Development Assistance Committee of the Organization for Economic Cooperation and Development, and the International Fund for Agricultural Development were also represented at the meeting as observers. The delegation of Sri Lanka was led by Mr. Ronnie de Mel, Minister of Finance and Planning. The past year was one of significant achievements for the Sri Lanka economy. Real GDP grew at 5%, matching the 1983 growth rate. And, after several years of precarious financial conditions, in 1984 both the external and internal deficits declined substantially. These results can be partly attributed to a series of government actions, including restrictive credit policies towards the private sector and constraints on public spending. However, a major factor in explaining this favorable economic outcome in 1984 was greatly improved international tea prices. Export earnings from tea rose by the equivalent of 4.4% of GDP (Gross Domestic Product), and government revenue from tea exports rose by 1.8% of GDP. The Members of the Aid Group commended the Government on its economic management and especially noted its efforts to continue the process of policy reform in 1985 by introducing an import tariff reform program and changes in export taxes for tree crops. They underscored, however, the vulnerability of Sri Lanka to adverse movements in tea prices and the need for the Government . to pursue policies that would stimulate diversification into other areas of comparative advantage, through correcting the structural weaknesses of the economy. In addition, it was noted that if growth is to be attained within a sustainable financial framework, issues  -2- of investment strategy and domestic resource mobilization will also need to be addressed. The participants urged the Government to pursue the implementation of new policy measures to stimulate the growth of exports, promote private sector development and greater efficiency in public enterprises. They also noted with satisfaction the recent summit meeting between India and Sri Lanka and expressed the hope that a resolution to the ethnic conflict will soon be achieved. Finally, they reaffirmed their continued support to Sri Lanka's development efforts.